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FOREX: USD/JPY Testing Weekly Lows, Safe Havens Rally On Fed Easing Expectation

FOREX
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The USD has remained on the backfoot through the first part of Friday trade. The BBDXY index last near session lows sub 1227 9off 0.25%). Focus remains on whether the Fed will cut by 50bps next week, when it is widely expected to commence its easing cycle. 

  • Market pricing has given greater likelihood to such a move since media articles (WSJ/FT) from US trade Thursday suggested a 25bps versus 50bps cut was a close call. Speaking in Singapore today, ex Fed NY head Bill Dudley stated there was a strong case for a 50bps cut at the September meeting.
  • US yields are weaker across the key benchmarks, led by the front end. The US 2yr yield was last at 3.58%, close to recent lows).
  • Such a backdrop has benefited the safe havens, with yen outperforming. USD/JPY got to 140.65 in recent dealings, fresh lows back to last Dec last year. We are around 0.70% stronger in yen terms now (140.80/85). CHF is up around 0.25%, USD/CHF last under 0.8500.
  • Equity sentiment has been mixed, despite the positive US/EU lead from Thursday trade. Japan equities weighed by the stronger yen. US equity futures are close to flat.
  • This has likely helped keep AUD and NZD relatively steady. AUD/USD last in the 0.6725/30, NZD at 0.6185.
  • Looking ahead, we have the BoE inflation survey, ECB speak from Lagarde, while in the US we trade prices and the U. Mich. Sentiment reading. 
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The USD has remained on the backfoot through the first part of Friday trade. The BBDXY index last near session lows sub 1227 9off 0.25%). Focus remains on whether the Fed will cut by 50bps next week, when it is widely expected to commence its easing cycle. 

  • Market pricing has given greater likelihood to such a move since media articles (WSJ/FT) from US trade Thursday suggested a 25bps versus 50bps cut was a close call. Speaking in Singapore today, ex Fed NY head Bill Dudley stated there was a strong case for a 50bps cut at the September meeting.
  • US yields are weaker across the key benchmarks, led by the front end. The US 2yr yield was last at 3.58%, close to recent lows).
  • Such a backdrop has benefited the safe havens, with yen outperforming. USD/JPY got to 140.65 in recent dealings, fresh lows back to last Dec last year. We are around 0.70% stronger in yen terms now (140.80/85). CHF is up around 0.25%, USD/CHF last under 0.8500.
  • Equity sentiment has been mixed, despite the positive US/EU lead from Thursday trade. Japan equities weighed by the stronger yen. US equity futures are close to flat.
  • This has likely helped keep AUD and NZD relatively steady. AUD/USD last in the 0.6725/30, NZD at 0.6185.
  • Looking ahead, we have the BoE inflation survey, ECB speak from Lagarde, while in the US we trade prices and the U. Mich. Sentiment reading.